>>> Better US Jobless Numbers Outweighed By The Crisis In The Ukraine And A Big Chinese Debt Default
>>> 9 Mar 2014
>>> by Rob Davies
There are times when the information coming in to investors becomes overwhelming.
There is so much going on it is difficult, if not impossible, to prioritise the crucial from the merely important.
Right now feels like one of those times.
In the past the US jobless figures were a vital element in assessing the US economy.
But Friday’s good news that 175,000 new jobs had been created was swamped by other data.
Instead the whole copper market focussed on the news that Shanghai Chaori Solar Energy Science and Technology Company could only pay a fraction of a US$15 million interest payment due on its bonds.
This triggered concern that the default might be a signal for a spate of corporate insolvencies in China that would reduce demand for copper in its biggest market.
And that pushed copper down US$104 on Friday below US$7,000 to US$6,930 a tonne, the lowest for seven months.
The fact that this price drop was accompanied by a 3,000 tonne drop in inventories in LME warehouses to just 269,000 tonnes was overlooked.
There might be a lot of copper in Chinese yards, but that is still a pretty low figure.
In the same way iron ore prices dropped 2.3 per cent to US$114 a tonne despite an increase in Chinese imports to 86.8 million tonnes. That’s significantly up from the 73 million tonnes that was imported in December and the 66 million tonnes imported the previous January.
Maybe the forecast of a three per cent increase in steel production for 2014 is a lot less than the nine per cent recorded in 2013, but it is hardly bad news.
Meanwhile, on a different continent the problems of maintaining copper production, let alone increasing it, were made clear.
Freeport McMoRan is developing the Tenke mine in the Democratic Republic of Congo. But it has to cope with power supplies being rationed to 95 MW when it will need 105 MW at full capacity.
To resolve this it is investing US$220 million in new capacity while the country is importing 150MW from neighbouring Zambia.
Since the DRC produced 900,000 tonnes of copper in 2013 the fact that it can only satisfy half the 900 MW power requirement in the Katanga region raises big questions over the reliability of this supply.
And overhanging all this data specific to the industry is the geopolitical uncertainty created by the crisis in the Ukraine. While the US ratchets up the belligerence index the Europeans are all too aware that Russia is the largest supplier of gas to Germany, still the industrial powerhouse of the region.
Mr Putin seems to be the only politician with a plan and the ability to execute it. His ambitions appear to be on the scale of Bismarck more than a century ago as Germany expanded and consolidated its commanding position. The European leaders, by contrast, are divided and confused. However, they have learnt two very important things.
One is that that they cannot trust Russia and Mr Putin. The second thing is that being green is all very well and good in stable times. But relying on a volatile and unreliable neighbour to power your industry and keeping your voters warm is not very sensible.
It surely cannot be long before Mrs Merkel reverses her plan to close all Germany’s nuclear power stations. After that an announcement on a programme of new plants cannot be far behind.
The one metal that might come out best of this crisis could be uranium. Oh, and expect approvals for shale gas exploration in Europe to be quickly granted in a quite a few countries.
Russian gas will never be cheap enough again for it to dictate the region’s foreign policy. And suddenly dirty old coal looks a lot more attractive too.
>>> Source: www.minesite.com
>>> 9 Mar 2014
>>> by Rob Davies
There are times when the information coming in to investors becomes overwhelming.
There is so much going on it is difficult, if not impossible, to prioritise the crucial from the merely important.
Right now feels like one of those times.
In the past the US jobless figures were a vital element in assessing the US economy.
But Friday’s good news that 175,000 new jobs had been created was swamped by other data.
Instead the whole copper market focussed on the news that Shanghai Chaori Solar Energy Science and Technology Company could only pay a fraction of a US$15 million interest payment due on its bonds.
This triggered concern that the default might be a signal for a spate of corporate insolvencies in China that would reduce demand for copper in its biggest market.
And that pushed copper down US$104 on Friday below US$7,000 to US$6,930 a tonne, the lowest for seven months.
The fact that this price drop was accompanied by a 3,000 tonne drop in inventories in LME warehouses to just 269,000 tonnes was overlooked.
There might be a lot of copper in Chinese yards, but that is still a pretty low figure.
In the same way iron ore prices dropped 2.3 per cent to US$114 a tonne despite an increase in Chinese imports to 86.8 million tonnes. That’s significantly up from the 73 million tonnes that was imported in December and the 66 million tonnes imported the previous January.
Maybe the forecast of a three per cent increase in steel production for 2014 is a lot less than the nine per cent recorded in 2013, but it is hardly bad news.
Meanwhile, on a different continent the problems of maintaining copper production, let alone increasing it, were made clear.
Freeport McMoRan is developing the Tenke mine in the Democratic Republic of Congo. But it has to cope with power supplies being rationed to 95 MW when it will need 105 MW at full capacity.
To resolve this it is investing US$220 million in new capacity while the country is importing 150MW from neighbouring Zambia.
Since the DRC produced 900,000 tonnes of copper in 2013 the fact that it can only satisfy half the 900 MW power requirement in the Katanga region raises big questions over the reliability of this supply.
And overhanging all this data specific to the industry is the geopolitical uncertainty created by the crisis in the Ukraine. While the US ratchets up the belligerence index the Europeans are all too aware that Russia is the largest supplier of gas to Germany, still the industrial powerhouse of the region.
Mr Putin seems to be the only politician with a plan and the ability to execute it. His ambitions appear to be on the scale of Bismarck more than a century ago as Germany expanded and consolidated its commanding position. The European leaders, by contrast, are divided and confused. However, they have learnt two very important things.
One is that that they cannot trust Russia and Mr Putin. The second thing is that being green is all very well and good in stable times. But relying on a volatile and unreliable neighbour to power your industry and keeping your voters warm is not very sensible.
It surely cannot be long before Mrs Merkel reverses her plan to close all Germany’s nuclear power stations. After that an announcement on a programme of new plants cannot be far behind.
The one metal that might come out best of this crisis could be uranium. Oh, and expect approvals for shale gas exploration in Europe to be quickly granted in a quite a few countries.
Russian gas will never be cheap enough again for it to dictate the region’s foreign policy. And suddenly dirty old coal looks a lot more attractive too.
>>> Source: www.minesite.com
